Economist makes a dire prediction for Australia’s real estate future

PHOTO: Brisbane, Australia. FILE

A leading economist warns that more Australians might delay having children, have fewer children, and face limited employment opportunities due to Australia’s high housing costs. The annual Demographia International Housing Report has labeled Australia as one of the most unaffordable housing markets in the English-speaking world.

The report ranks Sydney as the second least affordable city globally, with Melbourne and Adelaide also appearing in the top 10. Conducted by The Chapman University Frontier Centre for Public Policy, the study measures housing affordability by comparing median household income to home prices using a metric known as the ‘median multiple’. Hong Kong was ranked as the least affordable city worldwide.

The annual Demographia International Housing Report ranked Sydney (pictured) as the second least affordable city to buy a home in the English-speaking world

Sydney has consistently been among the least affordable cities for the past 16 years, with home prices 13.8 times the average income. Independent economist Saul Eslake expressed concern that the high cost of housing forces Australians to delay or have fewer children and make difficult choices about where to live. He noted that long commutes could hinder access to employment opportunities.

Professor Bill Randolph from the University of NSW’s City Futures Research Centre echoed these concerns, stating that high housing costs stifle economic growth. He explained that large amounts of money tied up in mortgages limit spending on other goods and services.

The report highlights that the housing crisis is exacerbating the cost-of-living pressures for many households. Middle-income families, in particular, are struggling with rapidly increasing housing costs, which are growing faster than incomes. The study attributes the crisis primarily to land use policies that restrict housing supply and drive up prices.

Australia’s housing market is more expensive relative to income than in the US, UK, Canada, Ireland, and New Zealand. The report emphasizes that all major Australian housing markets have been severely unaffordable since the early 2000s. Conversely, some of the most affordable housing markets include Pittsburgh (US), Edmonton (Canada), and Lancashire (UK).

Current data shows that the median house price in Sydney is $1,627,625, in Melbourne it is $1,032,020, and in Adelaide, it is $902,332. Despite a mandate to build 1.2 million homes over the next five years, only 945,554 new homes have been approved in the past five years. Additionally, successive interest rate rises by the Reserve Bank, with the current cash rate at 4.35%, are putting further strain on homeowners.

Most unaffordable cities to find a home

SOURCE: THE DAILY MAIL